NITIN NANDKISHORE BANGAD, MUMBAI V. ITO WARD 17(2)(4), MUMBAI

ITA 01/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8396 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 01-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 143(1); 13; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO. 01 /MUM/201 9 ( / ASSESSMENT YEAR: 20 10 - 1 1 ) NITIN NANDKISHORE BANGAD 59, GAYA BUILDING, 109, Y.M. ROAD, MASJID BUNDER (W), MUMBAI - 03 . / VS. ITO WARD 17(2)(4) R. NO.123/B 1 ST FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020. ./ ./ PAN/GIR NO. : ABAPB4356P ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 09 / 01 / 20 20 /DATE OF PRONOUNCEMENT: 15 / 01 / 2020 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 22 . 11 .201 8 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 28 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 10 - 1 1 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. THE LD . CIT(A) ERRED IN DISMISSING YOUR APPELLANTS APPEAL & UPHOLDING ASSESSING OFFICERS ORDER. THE LD. CIT(A) - 28 ERRED BY NOT GIVING CREDIT FROM PRESUMPTIVE 12.5% GROSS PROFIT THE 8.85% G.P. WHICH IS ALREADY OFFERED AS INCOME IN RETURN FILED BY YOU APPELLA NT. THE TOTAL GROSS PROFIT ADDED TO INCOMES COMES TO 21.35% (I.E. 12.5% + 8.85%). THIS IS VERY HIGH AND UNREASONABLE. YOUR APPELLANT PRAYS TO TAKE REASONABLE G.P. OF ALLEGED BOGUS PURCHASES AND MAKE ADDITIONS ACCORDINGLY. ASSESSEE BY : NONE R EVENUE BY: SHRI AKHTAR ALI ANSARI (DR) ITA NO. 01 / M/201 9 A.Y.20 10 - 1 1 2 2. YOUR APPELLANT KEEPS THE R IGHT TO ADD, AMEND OR ALTER ANY OF THE ABOVE GROUNDS ON OR BEFORE HEARING. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 21 . 09 .20 10 DECLARING TO TAL INCOME TO THE TUNE OF RS . 8,23,216 / - FOR THE A.Y. 2010 - 1 1 . THE RETURN WAS PROCESSED U/S 143(1) OF THE I. T. ACT 1961 . THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN TOOLS, KITS & EQUIPMENTS . THEREAFTER, AN INFORMATION WAS RECEIVED FROM THE DGIT(INV.) , MUMBAI IN WHICH IT WAS CONVEYED THAT THE ASSESSEE HAS MADE THE BO GUS PURCHASE ENTRIES OF RS. 1,66,34,537 / - FROM THE FOLLOWING FIFTEEN PARTIES. SR. NO NAME OF THE PARTY AMOUNT 1 PALAK ENTERPRISES 3065390 2 M.N. COMTRADE PVT. LTD. 103967 3 ABHILASHA SALES PVT. LTD. 166835 4 C.N. CORPORATION 1826261 5 UB TRADERS 187073 4 6 KEVAL ENTERPRISES 1795803 7 RUP INTERNATIONAL 2090251 8 INSPIRE TRADERS 33796 9 KANTILAL BROTHERS 40716 10 SAMARTH SALES SYNDICATE 145365 11 ORIENTAL TRADING CORPORATION 230662 12 BRIGHT ENTERPRISES 293002 13 SAHAJANAND ENTERPRISES 303161 14 Z ENITH TRADING CORPORATION 303599 15 VIRESH SALES CORPORATION 604852 16 HARSHIL ENTERPRISES 10,70,160 17 BHAVIK ENTERPRISES 26,89,983 TOTAL 1,66,34,537 4. THE CASE OF THE ASSESSEE WAS REOPENED U/S 148 OF THE ACT. THE NOTICE U/S 148 OF THE ACT DATED 11 .03.2016 WAS ISSUED AND SERVED UPON THE ASSESSEE. T HE AO RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASE IN SUM OF RS. 1,66,34,537 / - I.E. TO THE TUNE OF RS.20,79,317 / - . THE TOTAL INCOME OF THE ASSESSEE WAS ASSE SSE D TO THE TUNE OF RS.29, 02,533 / - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ADDITION RAISED BY THE AO , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US . ITA NO. 01 / M/201 9 A.Y.20 10 - 1 1 3 5 . WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE DEPARTMENT AND HAS GONE THROUGH THE CASE CAREFULLY . U PON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DRAWN DUE TO THE INABILITY OF THE ASSE SSEE TO PRODUCE THE SUPPLIERS. WE FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED THEN HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSIT ION IS SUPPORTED FROM HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT 18.6.2014 . IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION WE ARE OF THE CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE 12.5% D ISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER, IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED THAT WHEN ONLY THE PROFITS EARNED BY THE ASSESSEE ON THESE BOGUS PURCHASE TRANSACTION IS TO BE TAXED THE GROSS PROFIT ALREAD Y SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCHASE. 6. UP ON CAREFUL CONSIDERATION, WE FIND CONSIDERABLE COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. ACCORDINGLY, WE M ODIFY THE ORDER OF LEARNED CIT(A) AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY ITA NO. 01 / M/201 9 A.Y.20 10 - 1 1 4 DE CLARED BY THE ASSESSEE ON THESE TRANSACTIONS I.E. G.P. @ 8.85 % . ACCORDINGLY, WE ALLOWED THE CLAIM OF THE ASSESSEE. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE PARTLY ALLOWED ACCORDINGLY . ORDER PRONOUNCED IN THE OPEN COURT O N 15 /01/2020 SD/ - SD/ - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMB ER /JUDICIAL MEMBER MUMBAI; DATED : 15 /01/2020 V IJAY PAL SINGH/ SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) , / ITAT, MUMBAI